D.C.’s Office of the Attorney General is attempting to demystify restaurant service fees, which have become increasingly common after District residents voted to phase out the tipped minimum wage structure in November.
D.C.’s Office of the Attorney General is attempting to demystify restaurant service fees, which have become increasingly common after District residents voted to phase out the tipped minimum wage structure in November.
The AG’s office on Wednesday offered examples of service fee disclosures that comply with local consumer protection law, marking the first time the local government has offered specific language on how a restaurant might want to approach the contentious service fee.
While service fees are legal, they can run afoul of the law if restaurant operators do not accurately and prominently disclose these extra charges to patrons before they place their order. “A good rule of thumb for restaurants is to communicate service fee information in the same manner that they communicate their prices,” the OAG’s guidance says.
The OAG underscored in its guidance that compliance with consumer protection law will be determined on a case-by-case basis, depending on the “unique facts of each case.” Here are the examples of service fees that comply with the law and ones that do not:
Service fees are typically a percentage of the total sales added on to a bill. Unlike tips, which are required to go to workers, however, there is no legal requirement for how service charges are spent.
The OAG released this guidance to restaurateurs because it heard from patrons concerned over being hit with unexpected fees at the end of their meals, according to the release.
“Today’s guidance, developed in collaboration with industry stakeholders, aims to strike the right balance of supporting DC’s vibrant restaurant culture by further educating restaurants on how to comply with the District’s consumer protection laws while increasing transparency and fairness for patrons,” Attorney General Brian Schwalb said in a statement to press.
The fees are currently disclosed to diners in plethora of ways, sometimes described in a check as a “fair-wage charge” or, in recent weeks, an “Initiative 82 fee.” How lengthy the explanation a restaurant offers varies by establishment, which some operators argue is due to the lack of guidance or support they’ve been given so far.
The OAG first provided guidance on service fees to the city’s restaurants in March, sending letters to 2,400 restaurants that their charges could violate the law. But several restaurant operators took issue with that letter and attached guidance because they felt they were unfairly targeted or were downright confused as to how to exactly comply with the law.
One of the loudest critics of the OAG’s initial warning was Restaurant Association Metropolitan Washington, a trade organization that represents hundreds of local restaurants. But RAMW supports the guidance released Wednesday, which the organization weighed in on, according to RAMW President and CEO Shawn Townsend.
“RAMW asked the Attorney General for more specific guidance about services fees, and his office heard us,” Townsend said in a statement.
The OAG’s examples were “especially helpful,” Cork Wine Bar and Market owner Diane Gross, who is the vice chair of the RAMW board, said in the release.
The OAG encouraged the public to report bad actors. They have not yet brought any enforcement actions against restaurants for service fees, and the the hope is that restaurants abide by the guidance and that the office’s mediation team will follow up with individual restaurateurs who receive complaints, an OAG spokesperson tells DCist/WAMU.
A few local diners have already applauded the OAG for its guidance encouraging better business practices. But it’s unlikely that the guidance will settle the issue, given some people fundamentally oppose service fees and would rather increased operating costs just be reflected in prices.
Meanwhile, the D.C. Council is working through legislation that would define restaurant service fees, among other things. That bill is backed by RAMW, but has received pushback from organizers of Initiative 82, which passed in November and phases out tipped minimum wage. The OAG also criticized the bill for tethering incentives to service fees.